Stephen Innes
SPI Asset Management
US June CPI +1.6% y/y vs Bloomberg survey +1.6%, May +1.8%. Ex-food & energy CPI +2.1% y/y vs survey and May +2.0%.
One of the most poignant statements Fed Chair Powell made during Wednesday’s testimony was that he said the better payrolls print did nothing to change the Fed's assessment. Given that level of dovishness. the market should be looking to fade the better than expected CPI report
The US CPI proved not to be the disaster print for the USD many had expected but it's unlikely to change the market's short term bearish view on the US dollar.
Stronger Gold prices today had been a reflecting the increased probability of a 50 bp to this month, so there was a fast money flush on the better than expected CPI print. But it would be unwise to write off entirely an aggressive policy move by the Fed as the regime shift to a risk management approach is indeed an extremely dovish pivot all of which suggest Gold could remain a buy on the dip.
Canadian Dollar
We had lots of selling flow on the USD CAD today.
Although BoC Governor Poloz walked the market back to a dovish outlook, there has been good USDCAD selling in today; s market with a faltering USD following Fed Chair Powell’s dogged effort at being dovish, this leaves USDCAD as the most convincing inflationary USD short. Oil prices too have cleft the June high which should provide an additional fillip.
For now, the near-term support in USDCAD is 1.3040/5, but the markets will be looking to sell on moves to 1.31
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